Recently, John Hayes has argued in The Critic that globalisation is immoral because free trade has hollowed out the British economy and damaged the wellbeing of the people. No. Free trade has ensured our prosperity, allowing us to specialise in our comparative advantage, and it is uniquely just insofar as only it respects individual freedom. Once Adam Smith and David Ricardo are brushed up on, it is clear Hayes’s economic claims that free trade has increased poverty, inequality and reduced our productivity are false. Hayes’s arguments were wrong when the Corn Laws were being debated in 1846 and they remain wrong now. The ethical and economic case for free trade is unassailable.
The natural principle of human respect dictates individuals should be free to pursue their own happiness in their own way. Respecting this sphere of freedom made up by each individual’s person and property ensures no one is forcefully used as a mere means, a simple tool, or instrument, to the ends of others. Instead, everyone is recognised as the ultimate value they actually are. When respect in civil society is upheld, a proper harmony of people’s interests results which is always disrupted by coercion and theft. Crucially, the state is required to adhere to this natural principle just as much as private parties are. Thus: As it is wrong for a highwayman to demand payment from truckers transporting goods from city to city, analogously, it is wrong for the state to demand payment from merchants transporting goods from country to country. Highway robbery remains just that whether sanctioned by His Majesty’s Revenues and Customs or not.
Being a devotee of communitarianism, Hayes denies this liberalism and instead sees the state’s role as helping people to lead the good life. His opposition to free trade arises because it has allegedly “hollowed out our economy, destroying communities where industry was once the source of pride and purpose”. The two parts to this sentence have distinct moral import; I will first address the economic claim of hollowing out. Adam Smith and David Ricardo were right in maintaining that respect for free exchange enriches everyone. While Hayes takes Ricardo to be “acutely aware of its limitations”, Ricardo is unequivocal in supporting free trade. He writes: “Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each”. His theory of comparative advantage explains how even a country which cannot produce anything as absolutely cheaply as anyone else can benefit from free trade.
Take England and China and assume that with 100 workers each, China can produce 8000 microwaves or 6000 tables, while, contrastingly, England can only produce 1000 microwaves or 2000 tables. China is 8x more efficient at microwave production and 3x more efficient at table production, or their labour costs are an 1/8 and 1/3 of Britain’s respectively. Ricardo’s great insight is showing that by specialising in that product which it can make with a lower opportunity cost compared to the other country both can benefit. Following the above figures, England’s opportunity cost of producing a microwave is 2 tables, and, opportunity cost of producing a microwave 0.5 tables; China’s opportunity cost of producing a microwave is 0.75 tables and the opportunity cost of producing a table 1.33 microwaves. England has the lower opportunity cost in producing a table at 0.5 microwaves and China a microwave at 0.75 tables.
Assume each nation splits their production and consumption before any free trade 50:50, so, England has 500 microwaves and 1000 tables, China 4000 microwaves and 3000 tables. England in producing another 1000 tables reduces its domestic microwave production by 500, meaning, it could export 700 and keep 300 for its own consumption. If China imported England’s 700 tables for its own consumption, it could pay for it by increasing its own production of microwaves by 700 thereby reducing down its own table production by 525 units and exporting say 600 microwaves to England. The cost of each table for China via importing is 0.86 microwaves instead of 1.33 microwaves via domestic production: The cost of each microwave for England via importing is 1.17 tables instead of 2 tables via domestic production: Importing is cheaper for both. The result is that England’s net consumption goes up by 300 tables and 100 microwaves, and China’s net consumption goes up by 175 tables and 100 microwaves. Everyone is better off: Stopping free trade makes people worse off by forcing them to buy expensive domestic goods which after tariffs become relatively cheaper compared to international offerings. It’s highway robbery!
Against Ricardo’s theory of comparative advantage, people will claim that Britain will lose all of its money to China by buying their stuff because of their cheap labour/subsidised goods/low regulations with the result being unemployment here. Not so. If British goods and services and capital were always more expensive than equivalents in China then Chinese exporters would be getting Sterling which is worthless to them. In order to get rid of it for the Yuan they want, they’d have to offer their Sterling for fewer Yuan than previously, meaning, Sterling would become cheaper in Yuan terms. As Sterling becomes cheaper, though, British stuff starts to become competitive with Chinese stuff. The Chinese exporters will only get rid of all their sterling for Yuan when Sterling falls enough to clear the market, and, precisely at that point, Chinese stuff going to Britons will be of equal value to British stuff going to the Chinese. So: No net outflow of money occurs, and, hence, unemployment in Britain doesn’t result. If Britain has a trade account deficit that is because it has a capital account surplus: The balance of payments always balances.
Hayes will maintain all of the above is irrelevant because: Free trade “is only beneficial when it is difficult to move capital from one country to another”. Hayes states that both Smith and Ricardo wrote only “the privileged few” would benefit from free trade with mobile capital. In the immediately previous paragraph to Hayes’s quote of Ricardo, however, the economist is clear: “It would undoubtedly be advantageous to the capitalists of England, and to the consumers in both countries … that the capital and labour of England employed in making cloth, should be removed to Portugal”. In the aforementioned paragraph and that which Hayes quotes from too, Ricardo writes about the great advantages of free trade to everyone along with capital mobility alone via implied reference. The sorrow Hayes attributes to Ricardo over the weakening of allegiance to one’s own nations, can equally be read to refer to Ricardo’s mention of “fancied or real insecurity of capital” and the general aversion to “strange government and new laws”, ultimately, proper commercial concerns.
In light of Ricardo’s insights, the rest of Hayes’s economic claims can be shown to be suspect at best. He claims the rich alone have got richer since “hyper-globalisation” beginning in 2000: Yet the Gini coefficient in Britain has gone down from 35.1 per cent in 2000 to 33.1 per cent in 2023. He claims there is “rising poverty” in the UK: Yet absolute poverty has declined from above 30 per cent in 2000 to below 20 per cent today. He claims that productivity has stagnated since 2000: Yet it has still gone up by 19 per cent since then — albeit very slowly since 2008. Worklessness cannot be blamed on free trade either, rather, the great expansion in benefits must be blamed for that — and Hayes himself insofar as he opposed Labour’s pathetic bill to reduce welfare.
Ultimately, Hayes isn’t too concerned with economic matters — instead, free trade undermining the industry which once gave pride and purpose is his real gripe. Protectionism for him then is about imposing a better conception of the good life upon the population that I suspect involves more technical work and manual labour in renewed dockyards, mines and factories. No. Jobs in manufacturing are not inherently better for the average person than in services; if Hayes holds the position I attribute to him, many people in choosing a desk job over manual labour are mistaken in doing so. This is implausible.
Globalisation has been a boon to Britain and the world
Nevertheless: A father may know the best career for his son, but this doesn’t give him the right to force him into it, so, equally, even if the state knew the best industries for our wellbeing that doesn’t give them the right to cajole people into them by forcing the economy into a certain shape. Certainly, no one would accept the justice of a highwayman’s threat if you were driving to a shopping centre on his claim he’s simply protecting local shops which are better for people’s wellbeing.
The plain truth is protectionism is wrong. It is the moral equivalent of a highwayman demanding cash. Not only does it contravene the natural principle of human respect which dictates a proper harmony of individuals must be without theft and violence; tariffs and quotas also undermine the specialisation of each country into its own comparative advantages with the inevitable consequence of economic decline. Globalisation has been a boon to Britain and the world — free trade in particular. The idea it is immoral is simply for the birds.
